For many countries, the current account is limited to the items discussed above relating to exports and imports of goods and services. However, in addition to goods and services, the current account of the balance of payments should also take into account the movement of income and current transfers.
Income – a group of items of the current account of the balance of payments, including payments between residents and non-residents related to remuneration, and operations related to income on investments.
Income in the balance of payments is divided into wages and income from investments. Remuneration includes wages and other payments in cash or in kind received by workers outside the country of which they are residents for work performed by them for residents of other countries. The category of workers includes seasonal and other temporary workers who have been in the country for less than a year, as well as border workers whose center of economic interest continues to remain in that country, of which they are residents. If the employee has been in the country for more than a year, his income is recorded as migrant transfers.
Investment income covers income received by residents on their foreign financial assets: income on participation in capital (dividends) and income on debt obligations (interest). Dividends are a form of income distribution according to the share of participation in the capital of private incorporated enterprises. Their size depends on the results of economic activity and is not known in advance. Interest represents the loan fee. Its size is established in the loan agreement and therefore is known in advance. Income on investments is divided into:
income from direct investments – income accrued to a direct resident investor on the capital invested by him in a non-resident enterprise. Income from participation in capital is divided into distributed and reinvested income or profits. Distributed income usually takes the form of dividends, which are transferred abroad, and reinvested income includes the remaining share of the direct investor after distribution, invested in the further development of production; income from portfolio investments – cash flows between residents and non-residents arising from the purchase and sale of shares, bonds, long-term securities, government bills, other money market instruments; income from other investments – receipts and payments of interest on any other financial claims of residents in respect of non-residents (interest on deposits, loans, loans from the IMF).